Forest Landowners Tax Council

Reduction of the Capital Gains Tax

Reduce the current long-term capital gains tax rates as enacted in the 1997 Taxpayer Relief Act of 1997 and the IRS Restructuring and Reform Act of 1998.

Background: The Taxpayer Relief Act of 1997 and the IRS Restructuring and Reform Act of 1998 reduced the non-corporate long-term capital gains tax rate and retained the basic one-year holding period. The following is a summary of the effective dates and rates applicable to non-corporate timber owners.

For sale dates after December 31, 1997, with a one-year holding period, the top rate is 20 percent (for individuals in the 28 percent and above ordinary tax brackets) and the lowest rate is 10 percent (for individuals in the 15 percent ordinary rate bracket).

For sale dates after December 31, 2000, with a five-year holding period, the top rate is 18 percent (for individuals in the 28 percent and above ordinary rate brackets). However, the asset must have been acquired after the year 2000.

For sale dates after December 31, 2000, with a five-year holding period, the lowest bracket is 8 percent (for individuals in the 15 percent ordinary rate bracket). There is no requirement, however that the asset be acquired after the year 2000.

The Forest Landowners Tax Council supports an additional reduction in the top capital gains tax rate.

Rationale: Despite the recent reductions, a 20 percent long-term capital gains tax rate continues to discourage new investment and reinvestment in timber production. Timber farming is a cost intensive operation, and there are many years in which it produces no income at all. Long-term investment in forestland requires substantial return on investment when timber is finally harvested and sold.

Forest Landowners Tax Council
P.O. Box 784
Alexandria, VA 22313-0784
(703) 549-0747

Forest Landowners Tax Council

info@fltc.net

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